Deficit matters...

Nota: beware the wrath of Brad DeLong, especially on all topics deficit:

In the absence of the 1990 and 1993 deficit-reduction packages, we would have had an extra 35% of GDP worth of government debt--an amount that using Greg Mankiw's and Doug Elmendorf's rules-of-thumb (which I regard as too optimistic) would have reduced year-2000 GDP by 2.5% via the effects of crowding out on income from private capital alone. That's a good third of the cumulative year-2000 surprise good luck boost to production brought about by the late 1990s boom: remove good policy, and the boom loses a third of its boominess. Remove a third of the boom's boominess, and you remove one of the three percentage points' worth of extra deficit reduction coming from the strength of the boom. (And I would argue that there are bigger linkages between the budget and the boom than Mankiw-Elmendorf allow.) [ .... ]

An America without the 1990 and 1993 deficit-reduction packages would have been an America in 2000 where the federal debt held by the public would have been 70% rather than 35% of GDP, and would have been rising at 5% points per year. I cannot imagine why Samuelson wants to argue that such an America would have been able to borrow abroad on a large scale to fund domestic investment rather than an America from whose unsustainable fiscal policies foreign investors would have fled in terror. I cannot imagine where Samuelson thinks the purchasing power to maintain domestic investment would have come from in the face of the switch of an additional $3.5 trillion of investors' portfolios into government bonds. I cannot imagine who Samuelson thinks he is fooling in implicitly claiming that such swings in the federal debt would not have had powerful impacts on investment in the short and medium run, and on the pace of economic growth in the medium and the long run. You cannot divert 35% of a year's GDP from financing private investment to buying government debt and expect it to have "tiny, or nonexistent" effects on the real economy.

I'll consider myself cowed and convinced! This seems about right. It's one thing to say that 1990 and 1993 reduction plans caused the boom--which would be akin to saying that deficit reduction in 2004 could spur yet another boom. Like Galbraith says, there's good reason to doubt that. But... colossal public debt certainly hampers growth, as DeLong says, not least by diverting trillions in domestic investment. Already this quarter, investment growth sagged to 7.2%, and it's a reasonable bet that we can pin some of the blame on mounting government debt.

As opposed to...

Here's John Kerry's actual plan for education. Lame:

First, Kerry will form a New National Education Trust Fund that will guarantee that the Federal government meets its obligation to fully fund education priorities. Our children are too important to be subject to the whims of budget cutters in Washington DC.

Second, Kerry would fight to change the No Child Left Behind law to assure that our schools focus on teaching high standards to all children, and do not become drill and kill test prep institutions. John Kerry has already proposed the most comprehensive higher education plan of any candidate. Today, he is outlining a plan to assure every child has the skills to be ready for college.

Third, Kerry is stating his main priorities in education – from higher teacher pay for higher standards to assuring discipline.

Leaving aside Point Three--Kerry is stating his main priorities...?--this is just more of the same, with bigger checks shipped off to each state. Clearly he hasn't been reading my blog...

Bye-bye summer vacation

Interesting idea for fixing schools, from Ruy Teixeira and the folks at the Century Foundation:

To alleviate public school overcrowding, provide more effective instruction, raise the performance level of students, and reduce pressure on working parents, the federal government should support a move to keep public schools open all day and throughout the year. All-day schooling would involve keeping schools open past normal hours, providing educational and enrichment activities after traditional instruction has ended. Year-round education would entail keeping schools open for all students, not just the academically challenged, during the summer and might include a shift in the traditional school calendar—eliminating summer vacation for students and replacing it with much shorter breaks throughout the year.

Another second order idea that Kerry should push heavily. Most of the griping would come from people too young to vote, anyways.

More to the point, all-day all-year schools are popular with teachers, reduce overcrowding, reduce the need for day-care, and allow time and space for extracurricular activities and remedial education programs. What's not to like?

The hawk who came in from the cold

One of the oddest events in this year's Great American Partisan War has been the liberal conversion to deficit hawkdom. As James Galbraith notes, Dems are gazing back much too fondly at the 'golden age' of Clinton and Robert Rubin. That, in itself, is an odd bit of idolatry—Clinton never planned to become a balanced budget guy, he sort of got pigeonholed into it by Greenspan and Congress (according to Brad Delong). Moreover, we can't even say for sure that deficit reduction caused the boom. Joseph Stiglitz has argued pretty persuasively that it didn't. And even if it did have an effect, Galbraith is right that what might be good policy under certain economic conditions will not be good policy under all economic conditions:

Back in 1992, the big barrier to growth was financial. Banks were recovering from the fiascoes of the 1980s and were unwilling to lend. Businesses and households, on the other hand, were very anxious to borrow. We had a "credit crunch," which Clinton's 1993 budget and Greenspan's monetary policies helped to unstick. After that, the economy grew largely on its own, powered by business optimism and household debt. Today, there is no credit crunch. Our problem is not a shortage of lenders but fear for the future. It is the classic symptom of a creeping depression.

I'm not sure what 'fear for the future' entails, but he's certainly right in that cheap money and a short-term 'economic stimulus package' won't fix whatever structural unemployment problems we may be facing. Of course, most of Galbraith's policy suggestions—taxes on financial transactions, higher taxes on the top bracket, massive infrastructure spending—would all end in bloody murder if ever proposed. But his larger point on deficit reduction is valid.

Toddlers for Kerry

In addition to a bold intelligence policy, Kerry should also slap down a plan for universal preschool. Not only is universal preschool great policy, but it's a drastic and tangible reform that can help define Kerry's campaign. And as a bonus, it's a tough plank to crack—is Bush really going to run against toddlers?

Honestly, if Kerry defined himself with a bunch of drastic and tangible proposals on secondary concerns, he'd have a lot more room to maneuver on center stage issues. When he trotted out his fluffy plan for fixing Iraq, everyone could say, "Wow, Kerry doesn't have a plan for anything." But if voters knew that he had weighty proposals for some things, then they could assume that Kerry's a weighty proposal kind of guy, and cut him some slack for a few vague statements.

Coverts for Kerry

As long as we're talking about intelligence, we may as well make a side stop to talk about politics for a second. Keep in mind that I'm blessed with an awful, truly awful, political sense. I have next to no clue what "voters" think about, or why they act in the crazy and counterintuitive ways that they do.

Nevertheless, I think it's high time that Kerry came out with a major intelligence policy initiative, and market it high and low. Everyone and their undercover wife knows that the intelligence community needs a serious overhaul. Well, Mr. Kerry, here you go. Pick a venue and start talking. Propose something broad, sweeping, brimmed with specifics, and utterly bold.

Don't just blubber out easy platitudes about a new Director of National Intelligence. Go big. Go colossal. Lay out a specific role for a National Intelligence Council under the DCI. Say you want to fold the CIA into the Pentagon. Say you want a dedicated Counterintelligence Agency. Say that we need senior management training, that we need to run intelligence like a business, that the community needs to go through the same painful adjustments to the 21st century that companies like IBM and GE went through. Whatever piques you. The key here is to lay out both a strong vision for intelligence, and bolster it with sharp, specific proposals.

Now make this policy a major focus of your campaign. And then tell your challengers to bring it on.

If the Bush campaign responds by saying that this administration is already trying to fix intelligence, say that most of the changes currently proposed are merely cosmetic. If the Bush campaign says that the Kerry plan won't work, accuse Bush of siding with an inept and cost-inefficient bureaucracy. Be harsh. This is, after all, the bloated intelligence community that nodded off on 9/11. Many voters, especially swing voters, have already shown that they feel uncomfortable with blaming Bush for 9/11. But if the president is seen as timid in pushing real reform, well, that's a different matter… Everything we've heard from Richard Clarke will suddenly sink in, with a new and forceful relevance.

Realize that most of the public won't be in any mood to hash out the finer points of the Pentagon's structural organization. Voters will just see two candidates—one pushing for major change, and one meekly protesting that the bureaucracy that let 9/11 happen only requires a little tweaking. Guess which candidate they'll side with.

Of course, you don't want to get bogged down in wonky little details. Otherwise, the New York Times will report on your proposal with a "A Kerry spokesperson said [confusing statement X]… A Bush spokesperson said [confusing statement Y]…" and the average, much-harried reader will throw his or her hands up in confusion. So package it all in an overarching vision—something about a radical overhaul combined with modern, business-like efficiency. Declare a mini-war on the entrenched bureaucrats who resist change. Who can argue against that?

Also, don't make this about internationalism, about sharing intelligence with other countries. That may be sound policy, but it's open to the usual criticism and rebukes. Just keep quiet on the issue.

Remember, stay positive. Make this a constructive vision, a vision in which the Kerry campaign strongly believes. A plan that offers voters a real alternative. Once your vision has firmly established itself, then, only then, should you unload with your most vicious attacks. Blame the president for 9/11. Call the USA PATRIOT act a civil liberties-shredding model of inefficacy. Distort what you must and hyperbole how you will. But make sure you have something solid, something actual, upon which to stand.

It only seems like Bush effortlessly absorbed all those accusations and aspersions cast by the 9/11 commission. But he didn't. Those harsh words are still floating around, they just need to be focused more effectively. The intelligence issue is the perfect place to do that. Most importantly, the time is now. If Bush proposes his reforms first, then anything you respond with—no matter how bold—will sound like a tepid partisan reaction. So put that much-vaunted war hero bravery to good use and launch an offensive.

Intelligent Design

For a piece entitled 'How to Fix Our Intelligence,' this Time article offers very little in the way of, um, actual solutions. It seems mostly content with halfheartedly rehashing the same proposals everyone else has put forward by now. For starters, we get the standard 'more intelligence in the FBI' recommendation:

House Republican Wolf is preparing legislation that would create what he calls a "service within the service" at the FBI to focus on intelligence gathering, not law enforcement. It would be staffed with its own corps of spies recruited from college campuses, the CIA and other agencies.

Why has this idea gone completely unquestioned? There are plenty of good reasons why the FBI should not have its own intelligence gathering. The FBI is primarily a law enforcement agency, which involves a set of skills distinctly different from intelligence gathering. A self-evidently more efficient use of resources would be to separate intelligence from law enforcement, and coordinate the two at a higher level. Time heaps praise on FBI Director Robert Mueller for making his Bureau 'smarter', but it seems to me that Mueller is just jealously guarding the autonomy of his agency, at the expense of a smarter, community-wide coordination of intelligence resources. Wasn't that the whole problem in the first place?

Granted, most everyone has said we need some sort of higher coordination, and Time is no exception. Here's their take on the 'we need an overarching Director of Central Intelligence' recommendation:

Meanwhile, support is growing on the Hill for a plan drafted by two-time National Security Adviser Brent Scowcroft that would create a new intelligence czar with budget and program authority over the CIA and nearly a score of other intelligence units now under the Pentagon's control.

The change is long overdue. When the CIA was created in 1947, the Director of Central Intelligence was supposed to become head of all the intelligence networks, government-wide. But over the years the Pentagon created its own intelligence arms, and it now commands the lion's share of intelligence budgets, much of them spent on satellites. CIA directors have complained of this split-screen arrangement for years, noting that they can hardly be responsible for solid intelligence if they don't control the purse strings.

The problem here is that 'budget authority' is a vague term. As far as I know, there are two distinct ways to hold sway over a budget. First, you can make broad program goals, and allocate resources among the various intelligence agencies accordingly. This is what the OMB does, in conjunction with Congress, to determine the federal budget. Right now, the DCI already does this, and the best way to improve on this capacity is simply to split up the roles of DCI and head of CIA, so that the DCI is more impartial, and able to focus on broader goals.

But the second type of 'budget authority' is to actually have authority over how the budget is executed and implemented. This means the DCI would need to staff its own comptrollers and auditors, over and above what the Pentagon's intelligence offices already have. This seems needlessly complex, and logistically infeasible. The DCI should stick to broader planning and allocation, and let the Pentagon's agencies execute their budgets as they see fit.

Now of course CIA directors are going to want to 'control the purse strings.' But that doesn't mean we should listen to them. If anything, their complaints only highlight the need to separate the DCI from the CIA.

(In fact, the best course of action might be to stick the CIA into the Pentagon, but that's another discussion entirely…)

Busy, busy, busy

As a rule—well, okay, not as a rule, but as a general habit—I try to read only one book at a time. Lately, though, I’ve been leafing through a number of different books, and it’s a bit hard to keep everything in line. As playground monitors across the world know, all those voices end up collapsing into a dull din, and it’s impossible to figure out who pushed who down the slide, etc. So consider this post a little call to order. Over the past week:

1) John Kenneth Galbraith's The Crash of 1929. The book mostly focuses on the events and causes of the great stock market crash, which Galbraith separates from the Depression. Hopefully I'll write up a brief summary of this book, which offers some spectacularly uncanny parallels to the 1998 stock market boom 'n' bust.

2) Robert Allen Rutland's The Republicans: From Lincoln to Bush. Nice little historical overview of the GOP, but not a whole lot in the way of analysis. Why, for instance, did the GOP become the party of big business around the time of McKinley? Who knows?

3) Jim Mann's The Rise of the Vulcans. I'm only about 200 pages into this, but this has my vote for best recent book on Bush. It's non-partisan, and some of the anecdotes are cute—Did You Know that Reagan only narrowly selected Bush pere for the veep slot? The narrowly spurned bridesmaid was our very own Donald Rumsfeld, who could well have been president in '88.

More importantly, though, Mann does put the current Bush foreign policy in a historically coherent context. For instance, Reagan wavered between appeasing US-friendly dictators and forcing reforms on our more despotic allies, as his foreign policy team drew on often contradictory lessons from the Carter administration. These actions, in turn, underwent some rather sticky-slow metamorphoses in the Bush I administration. And so on. If anything, the main lesson of the book seems to be that foreign policy visionaries are sometimes flexible (as when Powell agreed to support the Somalia invasion, even though it violated his beloved doctrine) and sometimes dogmatic (as when Cheney refused to cut defense spending after the Soviet Union collapsed), and at any given moment it's impossible to predict whether dogma or flexibility will prevail.

4) Ken Auletta's The Underclass. This is really a fascinating book, an in-depth profile of those men and women who seem irredeemable, who live on the margins of society in almost hopeless poverty or crime or truancy. Auletta looked into some of the work-training programs run by the Manpower Demonstration Research Corporation (MDRC), and notes that the reality of extreme poverty is usually only crudely described by the dry shibboleths of the left and the right. To some extent, conservatives are right in that programs like welfare can create dependency and laziness among the underclass. And to some extent, liberals have a point that there are some pretty dire structural conditions that prevent people from helping themselves. But the reality, murky as ever, sits between these two extremes. Well, yes, naturally. But Auletta's book really digs into it. I'll try to write more about this as I get further along.

5) Kingsley Amis’ Lucky Jim. Read this one a long while ago, but I can't recall a single plum passage. And there are plenty of plum passages. The best parts, so far, thrust poor Jim Dixon into hangover hell, after a night of ill-conceived drinking:

Dixon was alive again. Consciousness was upon him before he could get out of the way; not for him the slow, gracious wandering from the halls of sleep, but a summary, forcible ejection. He lay sprawled, too wicked to move, spewed up like a broken spider-crab on the tarry shingle of the morning. The light did him harm, but not as much as looking at things did; he resolved, having done it once, never to move his eyeballs again. A dusty thudding in his head made the scene before him beat like a pulse. His mouth had been used as a latrine by some small creature of the night, and then as its mausoleum. During the night, too, he'd somehow been on a cross-country run and then been expertly beat up by secret police. He felt bad.

Amis keeps his dutiful ironic distance from the writhing lad here, but later on, when Jim realizes he has burned his sheets with a cigarette in his sleep, Amis is a bit more tender, while being equally funny:

Had he done all this himself? Or had a wayfarer, a burglar, camped out in his room? Or was he the victim of some Horla fond of tobacco? He thought that on the whole he must have done it himself, and wished he hadn't.

After 80 or so pages, I admit that Amis is very good at two things in particular—there are others, but these two things will be discussed. First, making motion: "not for him the slow, gracious wandering from the halls of sleep, but a summary, forcible ejection." Or this: "They all looked round at [Jim], Bertrand impatiently, Mrs Welch censoriously, Welch with incomprehension, Bertrand's girl without curiosity." Not only are we following the serene and often breathless movements of the narrator's camera, but things are actually happening off-screen, such that when Amis finally focuses on a long-neglected character, he or she is in mid-movement, as if he or she forgot to stay still while the narration was elsewhere. Elaine Scarry once wrote a whole book about narrative techniques for creating motion. Amis should be considered an advanced case.

Second, and maybe related, Amis is fairly good at noticing that people become very different personalities when they are around different people. (As opposed to simply acting and speaking differently around different people.) Even Shakespeare didn't depict this very well, but maybe for interesting reasons (characters too obsessed with their own continuity?). This narrative technique probably goes back as far as Don Quixote, where Sancho Panza is only Sancho Panza when he is bantering with Don Quixote. With anyone else, he loses that synergy and becomes a flailing little sycophant. But Quixote is a special case. I'm thinking more of a work like O'Neill's Long Day's Journey Into Night, in which characters semi-consciously shape themselves differently when they are around different people.

Something similar takes place in Lucky Jim, as when Christine and Jim become very timid around the domineering Bertrand. It's not just that they act timid and hold back things they would like to say. It's that they actually can't think of things to say. (At one point, Jim actually gets his thoughts out of order.) Now, there's a limit to how far such interpersonal influence can stretch, since this is still a very mannered book about a mannered society, and all interactions take place on a somewhat glossy stratosphere. Still, it's a method worth musing…

And on the end tally, the book is an outright riot—effortlessly funny and painfully funny.

All class

Mark Steyn declares that the last three weeks of fighting are nothing more than chinks in the teapot, and that—surprise!—he was right all along about everything. Everything. Especially his belief that Iraqis only ‘understand’ force and power.

His evidence? Why, he visited Fallujah the other day, walked into a bar wearing a stylish suit, ate some chewy chicken… and didn’t get killed. (No, really.) It’s like the Iraqis were all afraid of him or something. Big balls on that young buck!

Honestly, this line of thought is as asinine now as it ever was. Read Steyn’s piece, from beginning to end. only thing he ever seems to think about is force. How he’s so tough. How he cuts quite the badass figure with those shiny cufflinks. No wonder his analysis comes down to one thought, one concept. The man’s only got one thought in his brain: force, force, force, force. Reminds me of someone else we’ve heard from recently:

America does not understand the language of manners and principles, so we are addressing it using the language it understands.

Quote: Osama bin Laden. Steyn might be the slicker stylist, but, alas, manners rarely make the moron. Both men boil down to a cartoonish view of the other side as a bunch of roughnecks who speak violence and violence only.

Maybe if Steyn stopped gazing at his pretty little cufflinks and—oh, I dunno—talked to actual Iraqis, he might get a different sense of things. Does this guy sound like he only understands force:

"My opinion of the Americans has changed," said Hassan al-Wakeel, 38, the owner of a men's designer clothing shop on Outer Karada. "When the Americans came, they talked about freedom and democracy. Now, the Americans are pushing their views by force. All of us feel that."

How about this:

"Four American people were killed in Falluja," said Omar Farouk, 35, the owner of a convenience store next to the electronics shop where Mr. Hussein works. "Because of that, 500 people were killed in Falluja. The message of the Americans is that `we have the power.' Iraqis will never accept that."

Or this:

"When they first came here, the Americans were smiling," he said. "You could go up to them and talk with them. But now you look at them and see that their faces are very grim. They think all of us are enemies."

Huh. Granted, I haven’t sauntered into a bar in Fallujah yet, but it sounds to me like Iraqis understand a lot of things, and can distinguish between force and progress.

Yeah, they’re upset. They’re resentful. Notice that the resentment above comes from the middle class. It assuredly goes double, or triple, or more, for poor Iraqis—Iraqis toiling about without running water or electricity. Steyn said it himself: Fallujah is a rathole right now. After years of Saddam and war, most of the locals probably don’t have much left besides their dignity and pride. So it seems pretty goddamn predictable that they’ll be pissed off when even that gets taken away. And that’s going to make them highly susceptible to demagogues like Moqatda Sadr.

These people are not sheep who simply fall happily in line with the strongest player. Yes, Steyn’s right, if we kill enough men and bomb enough houses, they’ll decide it’s not really in their interests to keep fighting. Obviously. But that doesn’t mean we’ve won them over.

There’s an interesting piece in The New York Times about Latin American attitudes towards democracy that relates quite well to the occupation:

A majority of Latin Americans say they would support the replacement of a democratic government with an "authoritarian" one if it could produce economic benefits, according to a United Nations report released Wednesday in Lima, Peru.

The lesson here should be plain. Very few people believe strongly in the ideal of democracy. They believe in results and their own interests. That’s been the case since the founding of America, where ideals mostly just happened to coincide with interests. It’s the case in Latin America. And it’s the case now in Iraq. If democracy can’t deliver tangible results and benefits, at least partly, then there’s not much point in having a democracy, is there? Force won’t change that. And Steyn’s shiny cufflinks certainly won’t change that.

Barbarians

Billmon on alternatives to the draft:

One alternative, I suppose, would be to step up existing programs that allow foreign nationals to move to the front of the line for green cards and eventual citizenship in exchange for doing their hitches with Uncle Sam.

Rome went a similar route after it ran into its own military manpower problems. Soldiering became the most reliable ticket to citizenship -- that is, until citizenship was extended to the entire free-born male population of the empire as a revenue-raising measure. After that, the Roman Pentagon increasingly looked outside the frontiers for foederati -- barbarian troops living and fighting under their own tribal leaders. Before too long, foederati and their families were being resettled inside the empire in large numbers, and not long after that, accounted for the bulk of "Roman" military forces.

Not surprisingly, these newcomers had their own ideas about how the empire should be run -- and for whose benefit -- and became increasingly less patient with Roman racial prejudices and cultural pretensions. And the rest, as they say, is history.

This brings up a semi-unrelated point. I'm not quite sure where I stand on the multiculturalism vs. assimilationism debate when it comes to immigrants. But it does seem that a strongly multicultural America would undergo a distinct weakening of national pride and patriotism. That, coupled with a draft, just might create the sort of 'Roman barbarian soldier' scenario described above.

Also worth noting, an influx of non-patriotic soldiers would probably increase the rate at which soldiers leave the military early and join the privatized military sector. I'm not saying we should jingo ourselves up to 1940s-Japan levels, but it is a problem worth thinking about.

(Then again, plenty of immigrants proved to be plenty patriotic during WWII. Maybe Billmon's not giving our fine fleet of drill sergeants the credit they deserve?)

Whoa...

Make-believe lefty Gregg Easterbrook comes out and supports a Democrat. Maybe next we'll see Mickey Kaus stage a little donate-donkey drive of his own.

Also: great candidate, ugly site.

I’ll tax the everlasting sin out of ya…

Tax hikes, Texas-style:

Gov. Rick Perry called the Legislature into special session Tuesday to change the way public education is financed in Texas. He wants to give billions of dollars in property tax reductions to the most affluent homeowners while making up part of the revenue loss through a vast expansion of legal gambling, increasing cigarette taxes by $1 a pack, raising taxes on alcoholic drinks and collecting a tax of at least $5 each time a patron enters a topless bar.

Ever since New York City irked me to the utmost by raising its cigarette tax a few years back, I’ve had no end of tiresome fun wailing on sin taxes. A quick recap of the best arguments against:

Like most sales taxes, it’s a regressive tax, hitting lower income folks the hardest.

The sin tax creates an unstable revenue base, since “naughty” expenses are the first to go during hard times.

The government now has considerable incentive to promote gambling, smoking, drinking, and strip bars.

If a sturdy enough black market develops, the government ends up losing revenue. Witness The Prohibition. Not to mention, of course, all the other problems associated with black markets.

Sellers take a hit in profits—through absorbing some of the tax and through unhealthy competition with the black market.

Granted, I wasn’t crying this hard when Democrat darling Jennifer Granholm decided to raise cigarette taxes in Michigan earlier this year. But Granholm’s plan aimed to increase state revenue. Perry’s plan, by contrast, is supposed to make up for a cut in property taxes on wealthy estates. All the while mumbling something about balancing the budget. Well good luck to you, Governor! Expect to lose a few billion in revenue…

Alas, Perry’s ‘scheme’ may very well signal the start of a nationwide shift from asset taxes to highly regressive ‘sales and sin’ taxes. In all likelihood, the sales tax trend will start at the state level—with governors under increasing pressure to avoid much-needed tax increases—and from there become generally accepted practice.

Big business loves single-payer… really!

Guess what Fortune 500 companies are clamoring for socialized medicine?

…interest in more government health care is spreading from automakers to other manufacturers. In December, a study released by two business establishment trade groups, the Manufacturers Alliance and the National Association of Manufacturers, found that when it came to structural costs—environmental compliance, taxes, and employee benefits—American companies pay more compared to many foreign competitors. Structural costs add 22.4 percent to the price of doing business in the United States—more than in Canada, Britain, or South Korea. The largest single structural cost borne by the American private sector is health care. The clear implication: Unless society (read: the government) does something to relieve manufacturers of their health-care burden, the sector will suffer further.

The health-reform meme is now colonizing another group of Fortune 500 companies—major hospital chains. This week, HCA, the nation's largest hospital company, unexpectedly lowered earnings estimates for the year by about 10 percent. The main reason: It had to set aside extra cash to deal with swelling numbers of uninsured patients who can't pay their bills. In the first quarter, HCA had to set aside 11.7 percent of its revenues of $5.9 billion for bad debts, up from 8.1 percent the year before. (Here's the report.)

Single-payer health care probably wouldn’t ‘save’ American manufacturing, but it certainly makes sense for the Democrats to advance a healthy care plan by hyping its business-friendly aspects.

A few good background links:
Overview of single-payer systems
The False Promise of Single-Payer Health Care
Cato Institute on single-payer.

Islam and Democracy.

Anyone thinking about the prospects for pluralism and democracy in Iraq should study closely the lessons of Algeria:

Algeria's initial attempt at multiparty elections in December 1991 ended in disaster. The problem, Algerian officials say, was that the country picked the wrong moment to open the doors to pluralism and then opened them too wide. Algeria had slogged away for decades under a military-backed, single-party socialism that left the country's imams as the only credible opposition. By the late 1980's, the economy was in shambles - brought down by the oil-price collapse of 1986 - and the public was still angry about an incident in 1988 in which the military opened fire on antigovernment rioters and killed hundreds. Trying to address the discontent, the government began steps to liberalize in 1989 and held parliamentary elections in 1991.

"At that moment, we opened the doors to pluralism and the volcano blew," Ahmed Ouyahia, the country's prime minister, said of the parliamentary elections.

In a country that had not had any opposition political parties, fundamentalist Islamists had the popularity and organization to capitalize on the moment. They swept the first round of parliamentary elections and were almost certain to emerge from the second with the two-thirds parliamentary majority needed for the constitutional reforms that would have turned Algeria into an Islamic state. Among their stated goals: basing the country's justice system on the strict dictates of the Shariah, or Islamic law.

Now, as far as I can tell, there are two broad strategies for making a predominantly Islamic state amenable to democracy (as we know it). First, a benevolent dictator can ban all Islamic parties for a period of time, allowing other, secular parties to organize themselves into credible alternatives. This is exactly what the Algerian military did, stepping in after the 1991 elections and prohibiting all political parties based on religious belief. Of course, that process has taken over 13 years, and even today, Islamic parties need to be strong-armed, and the military elite still dominates politics.

The second strategy is for intellectual leaders to create and promote a popular doctrine that reconciles the central Islamic tenets (especially shari'ah law) with democratic ideals. Khaled Abou el Fadl has explored this topic thoroughly in Boston Review. Among other things, Islamic society needs to develop a theory or understanding of individual human rights, and well as a mature practice of legal interpretation. Obviously, this also takes much, much longer than the Algerian method-- Christianity took 1700 painstaking years to reach that point. But it's also a more permanent solution.

Notice, of course, that neither of this approaches would really work for Iraq. We simply can't ban Islamic parties-- whatever the CPA looks like, it will have to have a highly religious Shiite component. But neither can we force Iraqis to "evolve" into ultra-democratic Muslims overnight. So that leaves us with our current 'strategy': hoping all our chaotic planning will just, er, jumble itself into place.

Seriously: What Is To Be Done?

Naturally, John Kerry's op-ed on Iraq in The Washington Post came under fire for being watery, vague, and a bit heavy empty bombast. (And by the by, can we all finally agree that 'fisking' is the single most obnoxious form of commentary?) It's true, Kerry had very few clever ideas, and certainly nothing in the way of a surefire antidote for our Iraq woes. But I've been clicking furiously around the blogosphere today, trying to get caught up on all things war, and honestly, there are very few clever ideas to be found anywhere. Give Kerry credit for at least coming up with a thimbleful of half-decent specifics:

We should urge NATO to create a new out-of-area operation for Iraq under the lead of a U.S. commander. This would help us obtain more troops from major powers. [...] The United Nations, not the United States, should be the primary civilian partner in working with Iraqi leaders to hold elections, restore government services, rebuild the economy, and re-create a sense of hope and optimism among the Iraqi people.

Fisk away if it makes you happy, but Kerry's suggestions sound far more substantial than anything Bush put forward in tonight's platitude-fest (To wit: "Eventually, Iraq's security is going to be handled by the Iraqi people themselves").

Okay, so pablum noted all around. Now who has the bright ideas? Which of our pundits can get past the sniping and political manuevering and actually say, "Our problems are these. Maybe we should do this. Answer: Not many. Not many at all. Here are the few constructive proposals I’ve seen:

1.) Fareed Zakaria argues that the occupation has suffered from too few troops and an inadequate commitment to the security of the Iraqi people. He notes that ‘Iraqification’—the transfer of security to local forces—will take far longer than the Bush administration expects. In addition, we need more civilian authorities, and greater international legitimacy.

Zakaria’s solution: First, bring in more troops for security purposes until we can get Iraqi security forces up to snuff. Second, create a legitimate interim government by bending over backwards to win Ayatollah Sistani’s approval, including token members of Sadr’s faction. As Zakaria notes: “The goal for now is to create a stable, credible, even popular Iraqi grouping.” Liberal democracy will have to wait. In other words, put in a variation of Zakaria’s famous illiberal democracy, bolstered by UN oversight and US troops.

2.) Spencer Ackerman is tremendously insightful and proposal-ready in his commentary on Kerry. Now, Ackerman thinks that the TAL, the deadlock over the constitution, and larger factional power struggles are the main problems in Iraq. On his appraisal, the Sadr-Sistani struggle is of greater import than the bloody insurgency against the Marines. Taking this as his starting point, Ackerman notes that we need, as Kerry wrote, a “credible” goal in Iraq, and goes on to list a few concrete measures to take.

Step one: tell Sistani that we’ll handover elections to the Security Council if he allows us to scrap the June 30 deadline (which is, by now, unrealistic). Step two: eliminate the aspects of the TAL that allow ethnic mini-states (namely, the three Kurdish states) to wield effective veto over the constitution. (As he argues here, requiring a country-wide two-thirds majority vote for approval is the best option.) Step three: make every effort to disarm Iraq’s militias.

3.) Finally, the most comprehensive set of proposals come from Robert Collier in The American Prospect. After some on-the-ground reporting and interviews, Collier concludes that the real problems stem primarily from a nation-wide distrust of American intentions. Too many viable Iraqi leaders appear to be Bremer puppets. So he went around asking local leaders: What would stop the rebellion? and what would persuade the guerillas to give a foreign coalition some breathing space. The answers:

Hold full national elections in the second half of 2004 under UN supervision.

Abandon any open attempts to stack the new government with pro-Western moderates.

Allow Baathists to purge their ranks and create a new party (on the logic that a disenfranchised bunch of Baathist would be dangerous).

Start public trials of Saddam Hussein and other top regime officials.

Give the United Nations overall control of the Iraqi transition process, even though not all attacks will cease.

Call up the former Iraqi army and security agencies.

Keep U.S. troops out of main Sunni cities and replace them with, preferably troops from non-neighboring Arab and Muslim nations. (The UN has apparently suggested that, under the right conditions, Egypt, Pakistan and Bangladesh would all be willing to send in troops.)

Now, who knows if all of these proposals are feasible. But it’s a start. At the moment our big strategy consists of steamrolling through the "Shiite Vatican" and firing up a cycle of violence with no foreseeable end.

So here’s a modest proposal: why don’t all of the Democrats hitch up with Sens. McCain, Hagel, Lugar, Collins, and Snowe, and start sketching out strategy. Then, present a series of substantial recommendations to Bush. (I don’t know exactly what form this would take, but surely it can be done, can’t it?) Pass a resolution if needed. If Kerry leads this up, he’ll look like a political saint, and more importantly, we can finally start to stitch Iraq back together.

The privatized military, from head to foot

Unfortunately, I sold my copy of Peter Singer’s Corporate Warriors before privatized military firms really hit the newsstands. Basically, everything the media has said about private military contractors can be found in Singer, in some form or other. So I figure I’ll give a quick summary of the book, before I forget everything.

First, Singer divvies up the privatized military firms into three categories. First, there are military providers, who provide entire arm units—often a whole division—to employ in battle. An example is when the Angolan government contracted with the now-defunct Executive Outcomes to provide an entire commando unit that worked with government troops to beat back the UNITA rebels and turn the tide of war.

Second, we have military consulting firms like MPRI. During the war in the Balkans in ‘94, MPRI consultants--including retired US generals and military strategists--taught the Croatian army the tactics they needed to push back the Serbs and force a truce. In general, these firms will provide strategic planning, tactical training, officer instruction, and organizational consulting.

Finally, military support firms include Brown & Root, that much-maligned subsidiary of Halliburton. The US military contracts with support firms to provide most of its logistical necessities: engineering, construction, transportation, refueling, etc. etc. In theory, this practice frees up US troops to focus on other matters--namely, fighting.

Now the fundamental structural problem with private military contracts is that they’re, well, financial contracts. The client has little to no ability to oversee the military operation and make sure everything is running smoothly. Price-gouging is frequent--oftentimes a military support firm like Brown & Root will be reimbursed for all costs, so naturally they have no incentive to keep costs down. In every contract, the privatized firm is primarily trying to pursue profits, which may set it at odds with the aims and goals of its client. Private soldiers and security personnel are under no obligation to fight hard; if anything, they have incentive to flee and save themselves when danger looms. Firms don’t necessarily have incentive to keep military secrets secure, so they may be a source of security leaks. Moreover, if the firms themselves see an incentive to renege on their contracts, they will do so, leaving the client twisting in the wind. (A danger the US may face with its contractors in Iraq. Note also that during war, firms also have tremendous leverage, and could easily raise its asking price. More dangerous is if the firm sees incentive to switch sides and attack or work against its former client. Recently, 150 Russian contract soldiers in Chechnya were allegedly killed by accompanying Russian military units, because of friction between the two forces. All of these problems emerge because clients have no way to ensure that a contracted firm will align itself with the clients needs. Money is the worst guarantee of loyalty.

On a global scale, privatized military firms (PMFs) upturn classical ‘balance of power’ analyses. If states can employ PMFs instantaneously, then it will be difficult to figure out just how strong a given state is, from a military point of view. No one could have forseen Croatia’s surprising victory over Serbia in 1994, because conventional military appraisals would have overlooked the possibility of a consulting contract with PMRI. In addition, state militaries may no longer be the ultimate locus of power. If terrorist networks and rebels can rustle up enough cash, they can employ advanced military firms and actually overwhelm weaker militaries. With enough local support, a unit like the one EO fielded in Angola could probably topple most governments in Africa, easily. In addition, weaker states may no longer be dependent on military aid from countries like the United States. Why grovel for a few Pentagon fighter jets, with all the strings that come attached, when you can spend a bit of cash and contract a MIG-29 fighter unit of your own (which is what Ethiopia did in its war with Eritrea)?

Of course, privatized military firms can also do a great deal of good, as conservatives have rightly noted in their defense of the Blackwater security guards killed at Fallujah. The overburdened and often incompetent UN could use PMFs for peacekeeping missions. In fact, back in 1996 the UN had planned to use Executive Outcomes to secure a humanitarian corridor in Rwanda. Unfortunately, the mission never got off the ground. But privatized firms may offer a more flexible and effective peacekeeping option than current measures. Of course, all the contractual caveats still apply.

More disturbingly, PMFs can be easily employed by governments when official military force is politically unfeasible. Ever since the Clinton days, the US government has sent in private military operations to help the Colombian military squash the insurgency. Private firms can stomach casualty rates that would have Congress reeling. And private firms can engage in shady activities, since they are, at the moment, not beholden to international rules of war. As private military contracts become more prevalent, the ability of, say, the President of the United States to wage war without Congressional approval will only increase. Overall, war becomes less a state-sanctioned activity, and as such, becomes less a public-sanctioned activity. The opportunities for abuse are certainly there.

Follow the bouncing rates

I still don’t understand why, exactly, the Fed needs to raise interest rates in the coming year. Presumably, as more and more people find work, inflation will inevitably dust itself off and start to rise, but given the freakishly low rates at present, we should probably welcome a bit of inflation. Off the top of my head, the best rationale I can conjure up to explain the need for higher interest rates is that financiers who are paying for the federal debt by buying US Treasury bonds will eventually need a higher yield if we want them to keep shoring up our deficit. But if T-bills are, in theory, the lowest-risk investments in the world, why would anyone require a higher yield? Why can’t they be happy with the current state of things. A simple explanation no doubt exists; I just haven’t heard it.

(I’ve also heard that the Fed would raise interest rates to correct the unduly high ratio of debts to assets that most consumers and businesses are currently carrying. This seems like the most plausible explanation, but the media rarely brings up this point. Is that evidence for or against?)

Regardless, when Greenspan does get around to hiking up interest rates, we can expect emerging markets around the globe to take a hit, as The Economist explains:

Flat yields in mature markets make emerging markets look good. But there is more to it than that. The ample liquidity sloshing around in the rich world is also an invitation to enter into the so-called "carry trade". Carry traders borrow at low, short-term rates. They then invest the proceeds in higher-yield assets. Some simply buy long-dated American bonds. But the more adventurous look further afield, betting on richer-yielding emerging-market bonds with money borrowed at cheap rates in mature markets.

The problem is those cheap rates may not last much longer. Interest rates in Britain have already started rising. On Thursday April 8th, the Bank of England held rates steady at 4%, but it is expected to raise them another notch next month. When the Federal Reserve follows suit, the liquidity that lubricates the carry trade may dry up.

As the article notes, emerging markets have become so stable lately because investors have so much extra capital that they can afford to invest in (risky yet lucrative) developing countries. All that changes once interest rates rise. The main worry: when an emerging market can no longer count on foreign investment, its government is forced to finance a greater share of the country’s development. Then we end up with Mexico, circa 1994.

You know… the US is fighting two major wars and has a dying manufacturing base. Things will only get more volatile over time. So maybe it’s not such a good idea anymore for the rest of the world--especially the developing world--to rely so heavily on the Federal Reserve.

Possible worlds

In a piece that was too counterfactual even for The New Republic, apparently, Joshua Kurlantzick asks what would have happened, foreign policy-wise, if Gore had won in 2000. Basically, the scenario shakes down like so:

1. Gore spends pre-9/11 passing energy bills and paving the way towards single-payer health care. Builds lots of international alliances by supporting disarmament, Kyoto, etc.

2. After 9/11, does Afghanistan—the Operation Enduring Freedom part—just like Bush did.

3. Forges doctrine of “enlightened nationalism,” whereby we push liberalism on all our foes, using force if necessary, but take every possible step to strengthen multilateral alliances. Rewrites UN security council rules, making it easier to intervene abroad.

4. Creates international counterterrorism force, involving law enforcement, sharing of intelligence, and anti-terror financial policies.

5. Uses international structure to push Pakistan into opening up its nuclear program to inspectors, and cooperating with U.S. forces in hunting down al-Qaeda.

6. After al-Qaeda eradicated and Pakistan stabilized, Gore focuses on lesser WMD threats, putting big pressure on Saddam Hussein to open country for inspection.

7. When Saddam eventually kicks inspectors out, the U.S. invades, with broad international support (Gore spends a lot of time coalition building, relying on his close ties with European leaders). Muslim nations like Pakistan and Bangladesh assist in Iraq invasion, a big propaganda coup.

Some of this rests on wishful thinking and rather tenuous assumptions. If Gore had become President, Jeffords might not have defected, and Gore might not have used 9/11 as a whacking stick in the 2002 elections, as Bush did. So Gore might have faced a rather belligerent Republican Congress, and he almost certainly would have faced a less compliant media than Bush has (at least through 2003). Plus, Pakistan would have been a tough nut to crack.

Problems aside, this seems exactly right. As I suggested below, Afghanistan and Pakistan need to be dealt with as a unit—and the opportunity to do so was probably in the fall of 2001, with broad international support. Likewise, Iraq certainly could have waited, and if Gore could have roped in international support, we would certainly have a more fruitful time occupying Iraq.

That said, I think Gore almost certainly would have made some occupational blunders, analogous to some of Bush’s ill-fated decisions, like letting the DoD initially handle reconstruction, or disbanding the Iraqi army. But international support would have assuaged the pain, and it was definitely doable, it just would have taken time and effort. We had so much political capital after 9/11. Shame to squander it.

Parental units

Another point on Silas Marner. The central event in the book is when Silas, after losing his gold, discovers an orphaned child in his hearth. He adopts the kid, and over the course of raising the little rascal, Silas comes into “consciousness,” as Eliot calls it—drops his funny hermit ways and leads a more social and fulfilling life, etc. etc.

Well of course from a literary perspective this all seems very plausible. Like Wordsworth says in “Michael”:

A child, more than all other gifts
That earth can offer to declining man,
Brings hope with it, and forward-looking thoughts.

Touching, those Romantics. But does the “child effect” happen on a larger, sociological scale? We all know that good parents have a salutary effect on children. Do children tend to have a beneficial effect on parents, making them more responsible, or social? I’m not sure what sort of experiments could determine this. Obviously there are deadbeat dads all over the place, but what if there’s a pattern of irresponsible blokes who, after having a child, settle down and shape up? Why, we could encourage people to have kids. Republicans should be all over this (as if we need reasons to read Eliot).

It takes a village to raise a detective…

I don’t have a lot of time today to get right down into long, “epic” novels, so I’ve been making do with the local library’s stockpile of short stories and novellas. This afternoon I squeezed in some time to read George Eliot’s Silas Marner, weighing in at a slim and merciful 176 pages—as opposed to her 800-900 page mammoth novels like Middlemarch and Daniel Deronda. Big boys, those: I really can’t imagine that the big Victorian novels are ever going to rise in popularity.

Anyways, in the book, two events at roughly the same time. The hermit Silas finds that somebody has stolen his hoard of gold, and Dunstan Cass—a knave if ever there was one!—disappears from the village. Now, the natural thing to suppose is that Dunstan has filched the gold and fled. And, lo, this is what has actually happened. But marvelously enough, not a single person in the quaint little town can put two and two together. Wha—? Come on friends, get with it…

Maybe it’s just a bizarre plot device, and Eliot made her villagers intentionally dumb. But I wonder, are people nowadays better detectives? It seems like any old group of modern folks could make the connection.

But maybe early 19th century villagers really weren’t too good at playing detective. At one point people saw coincidences and invented supernatural causes to explain them. Nowadays we search a little harder to make causal links between two events, and have a better grasp that things can be connected in non-obvious ways—a crackdown on graffiti, for instance, can lead to a reduction in crime. So maybe all this starts to explain why my mom figured out the ending of The Sixth Sense right away, while the dumb little village of Raveloe never figured out who took Silas’ gold.

Blinkered

Another potent tidbit from the Hersh article:

The Administration’s decision to treat the Taliban as though all its members identified with, and would fight for, Al Qaeda was also a crucial early mistake. “There were deep divisions within the Taliban that could have been exploited through a political-military effort which is the essence of unconventional warfare,” Rothstein said. “A few months of intensive diplomatic, intelligence and military preparations between Special Forces and anti-Taliban forces would have made a significant difference.”

A bit of context would be much appreciated. Did the Bush administration make an honest to goodness error here, or did a black-and-white view of the enemy (taliban = baddies, therefore: destroy!) actually hamper their ability to evaluate the situation? Because if the latter is true, then we have pretty tangible proof—more relevant than anything Richard Clarke could possibly muster up—that Bush is too ideologically blinkered to fight the war on terror.

Alas, Hersh gives us nothin'.

Much ado about Afghanistan

The subheading for Seymour Hersh’s New Yorker article on Afghanistan reads: “Why Bush’s Afghanistan problem won’t go away.” Meanwhile, the table of contents, has as its subheading: “Why Afghanistan is going badly.” Of course, those are two different things: Afghanistan can implode, explode, implode again, and sink into the sea, but so long as it doesn’t turn into a major terrorist den, Bush doesn’t really need to worry about it.That’s why the carping about Afghanistan’s failed democracy haven’t really hit home yet. Human rights may not be the nation’s strong suit, but from a foreign policy perspective, this doesn’t really matter, as long as the country no longer poses a security threat. But all that could change if Hersh’s assessment is correct:

A year and a half later, the Taliban are still a force in many parts of Afghanistan, and the country continues to provide safe haven for members of Al Qaeda. […] Hamid Karzai, the U.S.-backed President, exercises little political control outside Kabul and is struggling to undercut the authority of local warlords, who effectively control the provinces. Heroin production is soaring, and, outside of Kabul and a few other cities, people are terrorized by violence and crime. A new report by the United Nations Development Program, made public on the eve of last week’s international conference, in Berlin, on aid to Afghanistan, stated that the nation is in danger of once again becoming a “terrorist breeding ground” unless there is a significant increase in development aid.

What to do? A willy-nilly increase in development aid will probably help very little. The Bush administration needs to figure out what, exactly, its goals are in the region. It seems to me that a democratic Afghanistan is either a near-impossibility, or a very long ways off. So in the interim, the best option, to prevent Afghanistan from becoming a security threat, might be to help install a strong, “enlightened” dictator friendly to U.S. interests. Second best would be an anarchic state in which none of the warlords, individually, holds too much power. This entails cutting out a major source of revenue by stomping out the drug trade, and making sure the Taliban doesn’t gain a foothold in the country.

In that case, the road to fixing Afghanistan goes through Pakistan, as members of the Pakistani military and intelligence forces have, reputedly, are still aiding the Taliban. Meanwhile, the northwest corner of Pakistan has all but transformed into a haven for Taliban forces. At the moment, the U.S. military has respected Pakistan’s claims to sovereignty and has refused to chase Islamic fighters across the Pakistan border.

All that might need to change. At this point, we should probably worry less about pushing through national elections in Afghanistan and worry more about hatching some sort of joint Afghanistan-Pakistan plan that gets rid of threats there once and for all. That might entail cracking down on Musharraf. The question, then, is how to go about doing this? And do we even have the resources to pull this off?